UPS today called off the €5.16 billion takeover of TNT Express after the European Commission toldthe two companies it was working towards prohibiting the planned deal.
The pullout follows clear public comments by European Competition Commissioner JoaquínAlmunia last week that Brussels would only approve the deal if the two companies were able topresent a “replacement” for TNT Express in the European express market by disposing of a largenumber of TNT businesses to a single buyer.
UPS will now pay TNT Express the agreed €200 million transaction termination fee and eachcompany said in separate statements that they will now focus on their own individual growthstrategy.
UPS announced that the European Commission (EC) “has informed UPS and TNT Express that it isworking on a decision to prohibit the proposed acquisition of TNT Express”. UPS said it submittedan initial remedies proposal on Nov. 29, 2012 and subsequently revised the proposal twice. UPSbegan the competitive review process with the EC in March 2012 following its takeover offer for theDutch express company.
Scott Davis, UPS Chairman and CEO, said: “We are extremely disappointed with the EC’sposition. We proposed significant and tangible remedies designed to address the EC’s concernswith the transaction. The combined company would have been transformative for the logisticsindustry, bringing meaningful benefits to consumers and customers around the world, whilesupporting growth in Europe in particular.”
Upon prohibition by the EC, the Offer Condition relating to EU Competition Clearance will notbe fulfilled and UPS will pay TNT a termination fee in the amount of €200 million and will withdrawthe Offer, the US company added.
UPS said it would make further announcements once the European Commission has issued itsformal decision which is expected to be adopted in the coming weeks. Brussels had been due todecide on the UPS offer for TNT by February 5.
Davis added: “I would like to thank TNT Express for their shared vision of the value we wouldhave created for our customers, shareholders, and employees, and for the significant efforts theymade over the past year.
“Looking ahead, our company focus will be on the continued execution of our growthstrategy. While we viewed the acquisition as a compelling growth platform, our financialstrength allows UPS to capture future opportunities.”
In a separate statement, TNT Express said that it and UPS met with the European Commission’s(EC) case team investigating the proposed acquisition of TNT Express by UPS on Friday (11 January2013) and the case team informed the companies that on the basis of UPS’s current remedy proposalit is working towards proposing a prohibition decision.
Subsequently, UPS informed TNT Express that UPS sees no realistic prospect that EC clearancecan be obtained and that UPS will not pursue the transaction on any other basis. Formal terminationof the Merger Protocol will occur upon receipt of the prohibition decision from the EC, which,based on the above, TNT Express deems inevitable.
TNT Express said it “regrets this situation, having believed the merger was feasible andbeneficial for all stakeholders”.
Looking ahead, the Dutch company said its Executive Board and Supervisory Board recognise theprotracted merger process has been a distraction for management. Therefore, management will nowsolely focus on reassuring customers of TNT Express’ commitment to providing industry-leadingservices, ensuring the engagement and commitment of employees, and strengthening its strategy,including further steps to improve profitability.
TNT said the company management “will provide an update on its strategy in due course”. TheExecutive Board and Supervisory Board of TNT Express acknowledge the great value of the company’soperations, people and commercial proposition, and are confident its strategy will bring value toshareholders, it added.
